One of the key news for financial markets on Wednesday was probably the establishment of a new historical peak by bitcoin quotes expressed in US dollars. The price of the popular cryptocurrency rose to around $67,000 yesterday.
JP Morgan analysts are considering whether bitcoin can be chosen as an inflation hedge among the assets available in the markets, even at the expense of gold. They compare inflows and outflows from funds giving exposure to bitcoin and gold, where an inverse relationship is clearly evident. On Wall Street, on the other hand, interest in ETFs for fut. on BTC is not waning, and yesterday the BITO ETF surpassed $1 billion in trading value. The entry of more ETFs in the US with bitcoin exposure was also announced.
Gold – not all is lost after all?
The price of gold rose on Thursday, approaching the $1,800 level amid weakness in the US dollar and continued inflationary pressures, but rising bond yields remain the main risk for the yellow metal. Gold appears to have risen in price for the past three days as the dollar has weakened, pushing the price of bullion lower against other currencies. With pressure mounting from New Zealand, Australia, the U.K. or the U.S., gold has always been considered a hedge against inflation, but any aggressive action by central banks to curb inflation and raise interest rates will translate into higher opportunity costs, weakening demand for bullion, the theory goes.
Looking at statements from Federal Reserve officials, while tapering may indeed begin in November, interest rate hikes are already not so certain in 2022. There are more and more doubts around this, as the Fed probably remembers that chasing cost inflation in the 1970s drove the economy into two recessions – one after the other, which it may want to avoid this time, waiting for inflation to come down on its own.
Silver with new luster
In addition to gold, investors may also look out for the price of silver, which has risen from around $21 at the end of September to almost $24.5 today. This appears to be one of the larger and faster upward moves, comparable only to what we saw in March 2021. Gold or silver may not have said their last word yet. Capital can still flow into these markets.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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